Financial Highlights

On behalf of the Board of Directors (“the Board”), I am pleased to present to you the 2010 Annual Report and the audited financial statements of Malaysia Steel Works (KL) Bhd (“Masteel” or “the Group”) for the financial year ended 31 December 2010 (“FY2010”).

Masteel ended FY2010 on a strong footing, successfully emerging from the economic challenges in 2009.

The Group’s turnaround performance was underpinned by the strong recovery in the global economy, particularly in Asia. In addition, property and commodity markets also rebounded with firmer demand and prices, notwithstanding the continued headwind in the developed economies in the US and Europe, which are still weighed down by unemployment and public debt.

The steel industry, after seeing prices collapse during the sub-prime crisis in the US in 2008/9, has been enjoying an uptrend in prices for most of the steel products since early 2010, signalling the worst is over for the industry as construction activities resumed with the improved business sentiment.

FY2010 FINANCIAL PERFORMANCE

Against this backdrop, Masteel posted the best-ever sales of RM1.0 billion for the Group in FY2010, compared to RM687.3 million previously. The impressive top line growth was largely due to both the increase in sales tonnage and the better selling prices of steel bars and billets.

As a result of the improved sales, the Group returned to profits with profit before tax of RM30.0 million in FY2010, against a loss before tax of RM8.5 million in the previous financial year.

In fact, the profits for the year under review would have been higher if not for the write-offs and provision amounting to RM14.0 million – RM5.0 million of which from impairment of bond investment, RM4.7 million as a result of disposal/reduction of stake in our subsidiary company – Bio Molecular Industries Sdn Bhd (“BioM”), and RM4.3 million provision due to a legal suit.

Masteel closed the year with net profits of RM28.1 million, or basic earnings per share (“EPS”) of 13.6 sen, versus a net loss of RM8.1 million or basic loss per share of 4.2 sen.

Our balance sheet continued to strengthen. Whilst shareholders’ equity as at 31 December 2010 showed a 14.7% improvement to RM478.6 million, due mainly to the retained profits; cash and bank balances increased 10.8% to RM48.4 million, and interest-bearing borrowings decreased to RM258.0 million, from RM264.8 million previously. As such, our gearing (net of cash) decreased from 0.53 time in the previous year to 0.44 time, a comfortable level for the Group to undertake further expansion.

With the positive performance, the Board has recommended a first and final single tier dividend of 1.35 sen per share in respect of FY2010. The quantum amounts to 10.1% payout from the Group’s net profits for the year under review. The proposed dividend is subject to shareholders’ approval during the upcoming Annual General Meeting. We look forward to your continued support and confidence in Masteel.

CORPORATE SOCIAL RESPONSIBILITY

The Board acknowledges the importance of Corporate Social Responsibility (“CSR”). Therefore, the company has taken various initiatives to uphold the interests of the society and address issues, while maintaining a healthy and safe environment for employees.

CORPORATE GOVERNANCE

The Board endeavours to adhere to corporate governance best practices within the Group as a crucial step to achieve business sustainability and prosperity. The Board is committed to implementing strategies that are in line with the Board’s objective to create and protect shareholders’ value.

The measures undertaken by the Board to maintain our corporate governance are highlighted in the Corporate Governance Statement in the Annual Report.

APPRECIATION

On behalf of the Board, I would like to express my appreciation to my fellow Directors, management and Masteel’s employees for the hard work and the steely resolve in turning the Group around.

To our valued shareholders, the Board is appreciative of your unwavering support. At this juncture, allow me to reiterate our steadfast commitment in making Masteel a strong investment case for growth.